Our tax system is hopelessly broken

The tax man cometh, and now we all wait for the state’s revenue totals. Welcome to what has become a grim tradition during budget season, when, if the last few years are any indication, we find out that we have even less money than we thought.

It’s the eternal, frustrating question: Connecticut has one of the highest tax burdens in the nation, and is one of the wealthiest states. Why the heck can’t we balance the state budget?

None of the answers are satisfying. Yes, the state overpromised on pensions and salaries, and yes, state employees and the unions that represent them have somewhat justifiably been unwilling to part with their bags of loot. And yes, we’re still feeling the aftereffects of a financial crash that took place nine years ago.

Our economy is stagnant. Our population is aging. Bridges and roads need repair. Social services have been gutted. There’s no money for anything. So what do we do?

There are four reliable ways to get around budget deficits, and we’ve seen them all in different combinations over the past seven years. First, we could drastically cut spending — again. We’ve already gone through so many rounds of this that it’s hard to imagine there’s much left to cut. We could end up closing more courthouses, or a university campus, or even another prison. We could lay off even more state employees.

Second, we could ask state employees and the unions to voluntarily give up some of what they are owed in their contracts. This has happened several times during the Malloy administration, and it’s always been grueling and controversial. Worse, it never actually fixed the problem. If you suspect the unions are even less inclined than usual to accept givebacks, you’re absolutely right.

The third way to close that budget gap is to raise taxes. We’ve also done this before, and to judge from the moaning and groaning it’s as if the governor personally came to everyone’s house and stole their grandmother’s life savings. There’s a lot of talk now about taxing the hedge fund industry, and there’s also a lot of hand-wringing about the very rich leaving the state if we do. We’re also hearing about tolls, raising fees, and so on. These are taxes of a different sort, but taxes nevertheless.

Raising taxes is politically the most unpleasant thing to do, and the legislature will weasel out of it if they can.

The final way to erase the deficit is to try and pass the burden on to someone else. This year, the towns are taking the brunt of the state’s fiscal ineptitude, under the governor’s budget towns will be bearing a lot of the cost of the teacher retirement fund. Most towns will be losing plenty of money, and the result will be higher property taxes. So, really, this final way is just like the third way of raising taxes, but with the added bonus that someone else has to raise them to cover for your mistakes.

We’re going to see a final budget that mixes a lot of these things together. Tolls are almost certainly coming sooner or later, as are painful cuts to government services. I’m also confident that towns will be bearing more of the burden of the teacher retirement fund, though just how much is unknown. The hole will be plugged, until next year when it suddenly isn’t, and we go through it all again. This can’t continue. Something is fundamentally broken in the way we finance government. We depend heavily on the very rich, and whenever they’re losing money, shifting that money elsewhere, or leave the state, the government’s coffers run dry. That makes us too vulnerable to the whims of the wealthy.

It’s also far too easy to get caught in the kind of downward spiral we’ve been in for nearly a decade, because the state is so dependent on a healthy economy to function well. Our economy is largely shaped by forces that are out of our control, such as low-skill manufacturing jobs moving overseas and wealth concentrating in huge cities like New York and Boston, meaning that those forces also affect the state budget. Of course, when the state’s economy is bad, state services are more in demand. But then state services are cut because there’s no money, and down we go.

We need some kind of tax reform. We need a better way to finance our government that is less vulnerable to economic forces, social trends, and people we can’t control.

I just wish I knew what that was. In the meantime, we wait for the cycle of deficits to end and then begin again, over and over.